Many people connect Warren Buffett with his right-hand man, Charlie Munger. Fewer know, however, that up until a few years ago, a third mastermind made investing decisions at Berkshire Hathaway (BRK.A)(BRK.B), Lou Simpson. Now that Simpson has founded his own firm, SQ Advisors LLC, GuruFocus today began to track the investor as its latest Guru.

Buffett met Simpson in 1996 when he was CEO of Geico’s capital operations and Buffett was completing his purchase of Geico. Impressed with his track record, Buffett kept Simpson on as chief investment officer.

At his retirement from Berkshire subsidiary Geico in 2010, Simpson managed more than $4 billion worth of stocks. Throughout his time with Berkshire, Simpson and Buffett’s stock picks overlapped sometimes due to similarities in their thinking, but both men clearly had independent processes and disagreed with each other sometimes as well.

Before joining GEICO in 1979 as senior vice president and chief investment officer, Simpson was president and CEO of Western Asset Management, a partner at Stein Roe and Farnham, and an economics instructor at Princeton University.

Portrait of a Disciplined Investor

Buffett frequently sang the praises of Lou Simpson. Once, in his 2004 investor letter, Buffett called him “a cinch to be inducted into the investment Hall of Fame” based on his return performance history. From 1980 to 2004, Simpson produced an average annual gain of 20.3%, compared to 13.5% for the S&P 500. In that time, he had only three negative years, and only four years of less than double-digit returns.

Later, in 2006, Buffett intimated that Simpson, “a top-notch investor with an outstanding long-term record,” would be the natural replacement for him as CEO of Berkshire, were Simpson not a mere six years younger than him.

In a rare interview, Simpson in 2010 told the Chicago Tribune upon his retirement: "My approach is eclectic. I try to read all company documents carefully. We try to talk to competitors. We try to find people more knowledgeable about the business than we are. We do not rely on Wall Street-generated research. We do our own research. We try to meet with top management."

SQ Advisors LLC

Quickly dissatisfied with retirement, Simpson opened his own investment-advisory firm, SQ Advisors LLC, in Naples, Fla., on Dec. 20, 2010, with his wife. He began the firm with $150 million to $200 million in assets under management, primarily the money of his family and friends and charities, he told Bloomberg. At Sept. 30, his total portfolio value totals $1.17 billion.

Simpson currently has 15 stocks, with largest holdings of his former employer Berkshire Hathaway (BRK.B), as well as Fiserv (FISV), TE Connectivity Ltd. (TEL), Lowe’s Companies (LOW) and Buffett favorite Wells Fargo (WFC). In his Berkshire Hathaway days, Wells Fargo was both he and Buffett’s second largest holding.

In the third quarter, Simpson added to most of his holdings and reduced less than 1% of only Lowe’s Companies Inc. and Dell Inc. (DELL). He sold out of only one position as well, Oaktree Capital Group LLC (OAK). Almost a third of the portfolio is weighted in the financial services sector, followed by consumer cyclical and technology stocks.

Excellent new addition! Lou has been correctly described as "one of the deans of investing".

Something which is not widely known is that Glenn Greenberg worked for a time with Lou. Over the years they often have had the same names in their concentrated portfolios. Currently they both have Fiserv, Oracle, Valeant and Schwab.

Lou is also on the BoD at Chesapeake. When Carl Icahn moved to change the board at CHK recently, he specifically requested that Simpson be retained. And good news for CHK longs - Lou bought significant amounts of CHK on the open market at prices well above today's!

Argonaut - yes, it was a personal holding. 100k shares at $26.7 per share (today it's $16.8). Here's the link to Canadian Value's article:[www.gurufocus.com]I haven't followed it closely. Maybe he bought more since.

So it looks like through personal, trusts and estate planning his holdings are still over 500k shares. Although not large compared to the 1B he manages, since it is all personal he must still believe the upside outweighs the tax loss if he sold. It's interesting to see the GRAT which is estate planning.

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